Every spring without fail, someone asks me about it. “Gerald, should I sell in May and go away?” I appreciate the question because it tells me the person is paying attention. But my answer is almost always the same: no, and I want to tell you why.
The saying has been around for centuries. It started in London as a reminder that bankers were heading out for their summer holiday, not as a serious investment framework. Over time, it picked up a life of its own. And while there is some historical basis to the idea that summer months have tended to produce weaker average market returns, a historical tendency and an effective strategy are two very different things.[1]
The Calendar Is Not the Signal
In my experience, some clients who have done well over time have not moved in and out of the market based on the season. They are the ones who stay focused on their plan and make adjustments when the actual conditions in their life or in the market call for it.
What I think the “Sell in May” question is really getting at is this: what do I do when things get rocky? And that is a question worth answering properly.
Not all market downturns are the same. A correction, which is typically a decline of 10% to 20% from a recent peak, is a normal part of how markets move. It can feel alarming when you are in the middle of one, but in my view, it is usually not a reason to abandon your plan. A bear market is a different situation. That is a decline of 20% or more, and it may be accompanied by a more serious economic backdrop that warrants a real look at your exposure and your timeline.
Knowing which one you are in matters a great deal. That distinction is something I think about with every client when markets get choppy, and it is a much more useful framework than checking the date.
Where I Land on This
I consider my fee to clients to be split between two things: financial planning and investment management. The planning side is where I guide you through what it could mean for your financial plan to make a reactive decision in May that you might regret in November. The investment management side is how I may make strategic portfolio adjustments based on current market conditionsrather than just a seasonal lull.
I have seen too many investors step to the sidelines at the wrong moment, sometimes even missing out on market gains that could have made a positive impact. Of course, those days can’t be predicted in advance.
If you step out of the market every summer based on a rhyme, you could be creating unnecessary capital gains taxes you may have been able to otherwise avoid. Research going back 50 years suggests that investors who followed the “Sell in May” strategy could have ended up with a fraction of what a buy-and-hold approach produced over the same period. [2] While past performance is never a guarantee of future results, I do find the data compelling if one can “hold” for 50 years without drawing down.
My philosophy is straightforward. Stay invested, stay informed, and stay in touch. Staying invested does not always mean staying in equities. There are times when shifting toward fixed-income products may make sense, depending on where you are in life and what the market is telling us. What I don’t want is to sit on the sidelines entirely. When I feel like something calls for a real adjustment, we make it together. We do not make it because it is May.
If you want to go deeper on how I think about positioning during volatile markets specifically, I covered that in a recent post that may be worth your time.
👉 https://lightforcefinancial.com/going-on-offense-in-a-volatile-market/
Questions About Your Portfolio?
If the recent market volatility has you thinking about your plan, I would encourage you to reach out before making any moves. That is exactly the kind of conversation I am here for.
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